When the issue of free music comes up there is always strong opinions. It really is a personal decision. If an artist wants to make their music available for free then they should do so, with a plan and an understanding of how it can make a return in the big scheme of things. If an artist does not want to give it away, then people should respect it and not steal it. It depends on the artist and the individual situation. The problem in today's industry is getting heard above the noise. Anyone can record and release an album digitally, or give it away for free. Unfortunately, there is no quality control as to what reaches the public and what doesn't. With more music available to the consumer than ever before and with no filters, rising to the top is no easy task.
Something to consider is the fact that if a song is not written by a band member then it is the writers that are going to see no return on the free giveaways. Many bands give their music away with the hopes of generating more fans and consequently more ticket and merch sales, etc... this however does not benefit the writers (except that with more exposure can come more opportunities to license a track).
If you choose to give your digital music away for free it should never be for "nothing;" it needs to be part of a larger marketing plan and at least be in exchange of an e-mail address. You can always sell 'special deals' to customers later through your newsletters.
I see musicians making money back from their "free" downloads by building their brand power. If you see yourself as a brand, then touring, merchandise, giving away your music, social media etc... is all marketing that adds to your brand value. There is money in the licensing and publishing side of music but to receive top dollar for a placement you need to prove your brand value. An indie band with little presence online, that isn't touring, that has low quality photos, and bad product isn't going to get as much for a synch license or a guarantee at a club, as a band with greater brand power. It all starts with the music, and if you can't get people to buy it then you are better off giving it away for free. Brand partnerships are a key element to generating revenue streams. Bands that tour have hundreds of posters put up in the places they play. They create events, posts, radio spots, press releases, have merch stands, websites, mailing lists, followers, a devoted fan base, an appeal to specific demographics,... All these outlets are beneficial to a potential brand partner.
If you can build your brand value, show how others can benefit and be creative as to who you approach for these brand partnerships, making a return on your musical investments is easy.
The industry has changed, fans and bands are able to communicate directly, there is no middle man. With no guaranteed success formula, a ton of new tools, and the ability to be creative, bands have the power to find new ways to get heard above the noise. A good example is a lot of the viral videos that bands are putting out with minimal budgets and a ton of creativity.
Times change and the people that succeed are those able to change with the times. Free music may not be the -end all be all- solution but neither is trying to stick to old models in which album sales paid all the bills. As a professional musician the end goal is to have your music reach the greatest audience possible and make a good living at it in the process.
When I ask people "how do you make money in this industry?" I hear more and more often that it comes from a combination of sources. If you are in an original band you may need to teach, play in a cover band, work a day job in the industry, whatever it takes to call yourself a professional musician. This applies to most industries, you do an array of things you "like" and don't just to pay the bills. At least you are in an industry you have a passion for, could be worse....
When you realize that your brand has multiple sources of revenue to pull from you should do whatever it takes to make any one of them benefit the greater whole. This ultimately results in an overall greater income.
Aside from the business of music, I have toured and recorded 3 studio albums with two bands, recorded on numerous other sessions, come up with the money to pay studio time, mixing, mastering, artwork and packaging, merchandise, music gear, band vehicles, PR, radio tracking, etc, etc, etc... So when I approach the business I am very aware of what it is to be a musician and I know what it takes to create a product and what the costs are.
One thing that is for sure is that to be in this business you need passion and drive... if you can imagine doing anything else other than music, you shouldn't be in it. That said you need to be able to put your ego aside, see the big picture and realize what you have is a branded product... So use both sides of the brain to sell it.